Banks are to significantly cut the return on money invested. This is not surprising considering the Reserve Bank of Australia (RBA) is cutting interest rates. As the banks follow the RBA down, which they are not obliged to do, they must cut outgoings on term deposits for example.
Considering banks make 60 per cent of their funds from various savings products, it is no wonder cutting what they pay out is on the horizon. If rates fall much lower people will be drawing out their savings and hiding their "loot" under the bed.
Customers are borrowing less because the bar for loans has been pushed too high. Well, perhaps that is a good thing. Australians were condemned for not saving enough; now they are criticized for not borrowing enough.
With an election date already set the government will push for full RBA flow-ons in the popular media. This does not look good for retirees who rely on money put aside in investments for their retirement. Money is getting cheaper in the wholesale market so fewer deposit options will be offered by the banks.
Economics
Australian Blog★
